Zhao Changpeng Hearing Full Record: Court Denies DOJ's Request, Ultimately Sentences Only Four Months in Prison

Editor: Wu Says Blockchain

Main Sources:

https://twitter.com/nikhileshde/status/1785353891871383864

https://www.theverge.com/2024/4/30/24144807/binance-founders-sentencing-hearing-liveblog

CZ was ultimately sentenced to four months in prison, far below the 36 months requested by the Department of Justice.

Full hearing:

CZ arrived at the court early, sitting with his legal team. He wore a dark blue suit and a light blue tie, looking quite nervous. However, due to the judge's personal matters, the hearing was postponed to 9:30 AM PT / 12:30 PM ET.

First major piece of information: Judge Jones disagreed with the DOJ's request for an extended sentence. Judge Richard Jones stated that he did not agree with the DOJ's proposed enhanced sentencing guidelines, which sought to extend the sentence from 18 months to 3 years, as there was no evidence that the defendant (CZ) was informed of any illegal activities.

DOJ lawyers argued that the judge should be able to infer that CZ knew of illegal activities, citing a previous case where the judge inferred that the defendant was aware of illegal activities.

Judge Jones essentially agreed with the probation office's viewpoint. The total level was 12, which would lead to 10-16 months of imprisonment and 1-3 years of supervised release. Before the final ruling, the opinions of the DOJ, the defense, and CZ will now be heard.

The judge explicitly rejected the DOJ's request for an extended sentence. The DOJ lawyer stated that CZ intentionally attempted to access the U.S. financial system. He said, "Violating the law is at the core of his efforts; we are not speculating here, Mr. Zhao has said this himself—seeking forgiveness, not permission."

The DOJ lawyer stated that CZ's voluntary surrender should be praised, but this has already been reflected in the plea agreement. "If Mr. Zhao does not need to face imprisonment after intentionally and willfully planning to violate U.S. laws to establish the world's largest cryptocurrency exchange and enrich himself in the process… then no one would face imprisonment, and the Bank Secrecy Act would effectively become a dead letter."

The DOJ lawyer stated, "We are not suggesting that Mr. Zhao is Sam Bankman-Fried or that he is a monster," adding that their recommendations are not aimed at CZ as a person.

The DOJ lawyer said, "Mr. Zhao and Binance did encourage compliance improvements, but that was after Binance was discovered… that is what they should have done… while commendable, it is not sufficient here to serve as a reason for probation." "A probation sentence here would incentivize others to violate the law and do so on as large a scale as possible."

Judge: Your recommendation is double the sentencing guidelines; wouldn't that lead to an unfair sentence? DOJ: No defendant bears such significant responsibility; "we believe this would not constitute an unfair sentence… unfairness lies in the severity of the conduct."

The judge continued to express strong skepticism towards the DOJ's arguments for a longer sentence, demanding specific legal grounds and other issues. The DOJ lawyer continued to emphasize that the sentence must reflect the seriousness of the crime.

CZ was not satisfied with this. He had been listening to the DOJ's statements, frowning and furrowing his brow from time to time.

The probation department spoke, recommending a prison term of 5 months, believing this would be sufficient to deter the defendant and others, "without being overly harsh." This would be one of the longest sentences for such conduct in the country.

The defense spoke, "When I hear the government discussing the crime here, they seem not to be discussing the actual crime," which is that CZ admitted to lacking anti-money laundering procedures. Violations of sanctions are irrelevant.

Now another defense attorney spoke, noting that CZ's mother, son, nephew, and sister were present. He pointed to letters supporting CZ, mentioning that CZ came to the U.S. He compared it to another case where a defendant spent 4.5 years protesting extradition: "[CZ] did not do that. He chose to come here."

The judge is now asking the defense attorney questions, including verifying whether CZ would benefit from continuing to own Binance.

The defense stated he has no control.

The defense argued that all factors support a reduced sentence (a lighter judgment).

Judge: The probation department still recommends 5 months; do you agree?

Defense: I agree, but I believe the probation department mentioned 5 months and then listed 6 factors you might consider to reduce this period. The defense attorney suggested that CZ be sentenced to probation instead of imprisonment—this judgment is very similar to that of Arthur Hayes, the co-founder of BitMEX, who was sentenced to six months of house arrest and two years of probation in 2022 after admitting to the same crime.

There was a relatively lengthy back-and-forth discussion about precedents and Binance's own history; the judge asked the defense whether they were implying that Binance implemented KYC/AML without law enforcement intervention; the defense stated this was at least "long before the solutions."

The defense again pointed out that CZ voluntarily came to the U.S. instead of staying in the UAE (the DOJ had previously stated this was commendable, but another possibility is that CZ could have become a fugitive).

CZ spoke. He first said, "I am sorry," and expressed his desire to take responsibility for his "mistakes." He pointed out that Binance has implemented KYC/AML procedures and is cooperating with the U.S. government. "In my view, before I stepped down as CEO, I wanted to do everything possible."

"Everything I see about your history and characteristics is mitigating and positive," the judge said. The court acknowledged that he voluntarily came to the U.S., had not violated the law previously, and took "unconventional and significant steps" in cooperating with law enforcement. However, the nature of the events is "disturbing."

The judge stated that he had read every letter submitted (161 letters), as "it is important to understand who you are." These letters depict a person driven by your motivation, passion, and energy, the judge said: you risked your entire net worth to make Binance successful. It is also clear from the letters that you are a dedicated family man.

The judge stated that CZ has the personnel, resources, and "funds" to comply with U.S. regulations, but he "failed on this opportunity." The judge said, "After this painful lesson, you have the ability and willingness to turn over a new leaf." I believe we are now entering the actual sentencing phase.

The judge again rejected the DOJ's request for 36 months, stating, "The court needs to strive to make an appropriate and reasonable judgment." The judge ultimately sentenced him to four months in prison.